The question has yet to be changed, so a new answer was very poignant this week:
I’ll tell you what is not (desirable) this question still being up here.
Also, someone wrote that people should get rid of the delusion of equality because people are inherently unequal, which is a huge positive.
Macro
This week we talked about Say’s Law, which basically says in a market system: as an entrepreneur supplies things he creates his demand for what other’s supply. At first savings (Some deluded Keynesians still believe this, including one of my more ignorant roommates) was thought to be a leakage in the system, until it was shown that savings creates the capital which businesses use to create supply, this is correct.
However, a guy named Malthus came said there is still a leakage in the cycle, when money is hoarded, however this is also incorrect.
Those who read this blog should be familiar with the fact that inflation is an increase in the money supply, this pushes the prices up. Conversely, when money is taken out of a system deflation is the result and prices fall correspondingly.
But, the amount of money taken out is so infantile it would take a while for the market to respond, you may say. This is possibly true, but then it must also be true that money hoarded does not represent a big enough amount of the money supply to create a depression as well.
Government Job Creation
A lot has been talked about in the news lately about the ‘jobs that Obama will be ‘creating.”
This is a huge fallacy, and an easy one to see. As Henry Hazlitt and Frederic Bastiat observed to create a correct economic framework, one must not look only at the short range consequences for one group of people, but at all the consequences for every group of people.
For the supposed job creation it is necessary to remember that government cannot create any sort of wealth it can only redistribute wealth. In the same vein the government certainly cannot create any jobs; it can only redistribute the jobs from where the free market thought they should be, so by definition the jobs will be unproductive and contribute nothing to society.
Private National Defense
I’m skipping the movie review this week, to finish my review of Bob Murphy’s Chaos Theory
In his private defense essay Murphy again uses insurance as his basis for how a free market could provide defense.
He stars with the example of an earthquake, if people lived in an area with earthquake risk, they could get insurance to protect their interest if there was an earthquake. To protect itself the insurance company would charge lower rates to those who had home that would serve better in an earthquake and would make sure people went to a safe place in the event, or forfeit their claims.
The same theory can be used for national defense, people could get insurance against attack, where the insurance company would pay for any damages and would pay money to their estate if they were killed.
With competition defense companies would be created and used by insurance companies to lower the risk of attack.
After this explanation, Murphy shows how the Calculation Problem (which I used in my defense of Anarchy) makes it so government defense cannot work efficiently (what would you rather have? A private company defending you to as efficiently as possible or people you don’t know forcibly taking your money and using it to spend $600 on toilet seats?).
Profit & Loss
Profit & Loss is a three-part, 56 page essay by Ludwig von Mises.
In the essay Mises shows that those who condemn profit without referring to loss are missing the point; entrepreneurs must face profit and loss in their business, in order to have the privilege to allocate scarce resources away from other uses they must earn a profit, if they do not they are run out of business, by operating at a loss.
This system makes it so that those who run big businesses can only stay that way by satisfying the public (which in a voluntary economy earning a profit would mean that one satisfied his customer, or they would not do business with him) and earning a profit, instead of condemning big business it should be revered, if the business was not making the lives of society better it would no longer be a big business.
Profit & Loss is a good quick read, especially good for those who wish to convert ignorant Keynesian or socialist friends to the correct economic way of thinking.
Quote of the Week
Life, liberty, and property don't exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place. ~Frederic Bastiat
Sources, this week
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